Advantages
To begin with, new franchisors and their partners typically dedicate a great deal of their own resources to their newborn ventures. They have invested their time and money; therefore have a vested interest in making every effort to have their franchise become a success.A new franchise organization can be a nice way for franchisees to be part of a real pioneering effort. Franchisees can often feel as though they are partners in the new endeavor by actively participating in the evolution of the company as well as by recommending improvements.
Additionally, new concepts usually offer a great opportunity to get in on the ground floor before others jump on the bandwagon. Therefore the investment can be quite lucrative.
At the same time, as a franchisee in a new system, prime locations are more likely to be available. In a more established system, key locations will probably be few and far between.
In order to market to new franchisees, franchisors tend to be more flexible on contract terms. A franchisee may have more leverage to negotiate conditions and costs.
Finally, if a franchisee starts out with the franchise at the very beginning, he or she may be able to move up to a higher position within the organization. Becoming an area developer may be an option.
Disadvantages
Since there is little or no history behind the new system, there are typically more risks involved.Also, new franchisors may not possess the experience or skills to provide adequate support and training to their franchisees.
Another possible negative of new franchise systems is that it may be more difficult for franchisees to obtain funding. There is little or no record for potential lenders to base their decisions on.
Lastly, it can take quite a while for a new brand to become established. Therefore, a longer wait may occur for a return on investment.
What to Look for in a New Franchise System
As with any new investment, it is imperative that potential franchisees do their research before committing to joining a new system. Use the Internet and library system to investigate.First, determine if there is enough demand for the product or service. Also, decide if the item can be easily reproduced by someone else. You will also want to find out who the main competition is.
Additionally, it would be helpful to find out some information about the franchisor with regard to the type of experience he or she had previous to establishing the franchise. If you find that there has been previous experience in the same field or other types of business experience, it is more likely that the franchise will turn out to be successful.
Overall, if you are brand new to franchising you will need to decide if you are comfortable learning franchising from a new franchisor or if you would be better suited for participation in a more established franchise.
